Chinese manufacturing expands in October

November 1, 2012
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China’s manufacturing sector has been hit this year by a broader slump in the economy/XINHUA-File
BEIJING, Nov 1 – China’s manufacturing activity grew in October for the first time in three months, data showed Thursday, adding to hopes the economy is finally emerging from its recent slumber.

The signs of upward momentum were reinforced by a separate survey by banking giant HSBC showing activity hitting an eight-month high.

China’s official purchasing managers’ index (PMI) rose to 50.2 last month, up from 49.8 in September, which was broadly in line with expectations, data published by the National Bureau of Statistics showed.

A PMI reading above 50 indicates expansion and anything below points to contraction.

“This improvement suggests that China’s growth momentum has rebounded and this trend will be sustained further,” economists Liu Li-Gang and Zhou Hao of ANZ bank wrote in a commentary.

The HSBC index stood at 49.5 in October, up from 47.9 in September, the bank said in a statement. While it still represents shrinking activity, the HSBC data continue a recent uptrend.

October’s final HSBC result also compares with a preliminary reading of 49.1 announced last week.

China’s PMI figures are a closely watched barometer of the health of the world’s second-largest economy.

Qu Hongbin, HSBC’s chief economist for China, said in the statement announcing the data that the latest figures indicate “China’s industrial activity continues to bottom out following a modest pick-up last month”.

China’s manufacturing sector has been hit this year by a broader slump in the economy, which has suffered from weaker demand for the country’s products in the crucial markets of Europe and the United States.

Beijing last month said gross domestic product grew 7.4 percent in the three months until September, slowing for the seventh straight quarter and marking the worst performance in more than three years.

Analysts suggest the latest news, on top of better export, industrial production and retail sales data, indicate that the worst could be over for the Asian giant.

Grace Ng, senior China economist at JPMorgan, told Dow Jones Newswires the official data shows “the economy is on the way to a moderate recovery” and reinforces the message that it has bottomed out.

The improving economic outlook comes at a crucial time for China, which is embarking on a once-a-decade leadership transition set to begin at a Communist Party congress on November 8.

Some China watchers have voiced concern that policymakers have been distracted by politics instead of focusing on correcting the economic slowdown.

“With membership of the politburo standing committee membership likely settled, top politicians should re-focus on economic policy making,” analysts at Bank of America Merrill Lynch wrote in a report Thursday, referring to China’s most powerful decision-making body.

“Though we don’t expect a big stimulus, policy easing/stimulus will most likely be continued as growth recovery is not solid yet and top policymakers have no room to be complacent yet,” wrote economists Lu Ting and Hu Weijun.

Various measures to bolster the economy this year have included two interest rate cuts in quick succession in June and July.

China, however, has avoided the kind of major initiatives it took after the 2008-2009 global financial crisis, which included about half a trillion dollars in government-driven stimulus.

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